Govt. Is Planning To Reduce Your Take-Home Salary; Major Labour Reforms Planned!

As per an exclusive report, it has been revealed that Govt of India is planning a major overhaul of existing labour laws.


Take-Home Salary Will Now Be Reduced

This is certainly a bad news for salaried employees, who are banking on next month’s salary to manage their monthly expenditures.

Govt. of India is planning a slew of labour reforms, which if implemented, can bring down your take-home salary!

What exactly is being planned, and how can it affect your salary?

Keep reading to find out!

Take-Home Salary To Come Down?

As per an exclusive report by Business-Standard, it has been revealed that Govt of India is planning a major overhaul of existing labour laws.

Once the changes are approved, and notified, then take home salary of all existing employees in India can come down.

As per the new laws, the basic income of an employee will have to go up, and allowances such as house rent, travel, medical etc will have to be capped at 50% of the overall take-home salary.

Now, in case basic income is increased, and allowances are capped at 50%, then this will lead to lower take-home salary because then, the employee will have to shell out more for taxes and cess, every month.

What Triggered These Labor Law Amendments?

As per some sources, Govt. officials have noted that most of the employers deliberately put basic income less and increase allowances such as house rent, travel and medical higher – as high as 90% in some cases in IT firms.

Now, lower basic income will mean that the employee will have to shell out less for social security schemes such as provident fund, insurance and gratuity besides tax.

The Ministry observed:

“Cases have been noticed where employers show basic wages plus dearness allowance as very low, say 10 to 30 per cent, and the remaining wage is shown as various allowances for performance, entertainment and conveyance,”

Social security schemes and taxes are decided on the basic income, not on the take-home salary.

Govt. has identified this loophole, and this is the reason that labour reforms have been planned such as basic income rises, allowances decrease, and this translates to less take-home salary.

Around 19 major labour laws are being scrutinized and studied right now, and some major announcements are expected soon.

Three major labour laws will be amended for this:

  1. Payment of Gratuity Act, 1952
  2. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  3. Employees’ State Insurance Act, 1948

Mixed Reactions From Labour Unions

While some Labour Unions have hailed this decision, some have warned that this may lead to more pressure on companies as wage bills will increase.

Virjesh Upadhyay, general secretary of the Bharatiya Mazdoor Sangh (BMS) was part of the committee which was set up to rationalize salaries across India.

He said,

“This is an encouraging move. It will lead to social security because firms now suppress basic income to save cost,”

We will keep you updated, as we receive more inputs.

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